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FCC Says A La Carte TV Would Cost More

Advocates Fault Pricing Study

By Frank Ahrens
Washington Post Staff Writer
Saturday, November 20, 2004; Page E01

Most consumers would end up paying more for cable and satellite television if they were allowed to pick only the channels they wanted to watch instead of being forced to buy large packages of channels, a Federal Communications Commission report concluded.

A six-month study of "a la carte" cable and satellite pricing, ordered by Congress, found that consumers would save money on their monthly bills only if they pick and pay for fewer than nine channels.

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However, the study found, most households regularly watch an average of 17 channels, including traditional broadcast staples such as ABC, CBS, NBC and Fox. Under the a la carte plan studied, consumers would see their monthly bills rise between 14 and 30 percent if they purchased 17 channels, the report said.

Cable subscribers, consumer groups and members of Congress have increasingly complained about monthly cable bills, which have risen at three times the rate of inflation since the federal government deregulated the industry in 1996.

In May, Congress ordered the FCC to study the a la carte proposals as a possible remedy. Yesterday's report shunned the idea of requiring cable companies to offer a la carte service, saying imposing new regulations should take a back seat to fostering competition and technological breakthroughs that would offer consumers more choices. It cited the growth of video on demand, in which viewers pick and pay for only the programming they want.

Sen. John McCain (R-Ariz.), an advocate of a la carte pricing, said that yesterday's report was a disappointment and that he would push for a voluntary a la carte system. It appears, he said in a statement, "the industry has been successful once again in distracting policy makers with a 'parade of horribles' that they allege would result from a mandatory a la carte offering."

Consumers Union, the nonprofit group that publishes Consumer Reports magazine, faulted the FCC for comparing the cost of a la carte to the price for a package of channels. Instead, it said, a la carte should be offered as an option, because some consumers are happy to pay for entire packages while others would like to pick and choose. Surveys conducted by the group have found that two-thirds of cable consumers say they would like an a la carte option.

"For people on Capitol Hill, this should raise more questions than it answers -- if you charge the same for nine channels as you do for 50 channels, doesn't that mean there's something wrong with the cable market?" said Gene Kimmelman, senior public policy director of Consumers Union.

The Parents Television Council also supports a la carte pricing, saying consumers should not have to pay to receive channels that broadcast objectionable material.

"The FCC's report on 'a la carte' was hopelessly inadequate, as it barely mentioned the prime reason that so many people want cable choice: Cable is completely awash in raunch," said Timothy F. Winter, executive director of the Parents Television Council.

The large cable companies, such as Comcast Corp., have fought a la carte pricing, arguing it would drive up customers' bills and mean the demise of lesser-watched channels, such as BET, that would have to fend for themselves rather than be subsidized by popular channels, such as USA and ESPN, as they are now.

"The FCC report to Congress makes clear that government-mandated per-channel pricing would not offer any benefits to the vast majority of consumers and would in fact result in higher prices, fewer choices and less diversity in programming," said Robert Sachs, president of the National Cable & Telecommunications Association, the trade group of large cable providers.

TV One, the cable channel co-owned by Radio One Inc. and Comcast, also praised the FCC report.

Cable operators argue that the price of service is rising because cable networks such as ESPN, HBO and Lifetime are increasing rates.

The networks, owned by media giants such as Time Warner Inc. and the Walt Disney Co., force cable and satellite providers to buy bundles of channels, requiring them to take new or less-popular channels to get the channels consumers want most. In other words, if a cable system wants Viacom Inc.'s popular MTV, it may also be required to carry the lesser-watched Spike TV.

Matthew M. Polka, president of the American Cable Association, the trade group of small cable operators, said the FCC should require media companies to release more information about their pricing and bundling practices so they can be held accountable.

"I have seen this a la carte used by major media programmers as a diversionary tactic to avoid being accountable to Congress, the FCC and the public," Polka said.

© 2004 The Washington Post Company